It’s that time of year again…the Deloitte CPO Survey 2018 is here! For the past seven years, the survey has been a valuable benchmark for trends, developments, issues, and challenges in procurement as seen by procurement leaders around the world. This year, over 500 procurement leaders from 39 countries participated in the survey, providing key insights into the state of the procurement function. While the results of the survey indicate many positive trends in procurement, they also reveal several key areas where many procurement organizations are falling behind. So what are CPOs thinking in 2018, what are the challenges they are facing, and how can digital tools help CPOs succeed?
What Are CPOs Thinking?
The main business strategies for CPOs in 2018 are not that drastically different from last year:
- 78% will focus on cost reduction
- 58% on new products and market development and
- 54% on managing risk.
However, other information gathered from the survey indicates a clear shift in focus within the procurement function. In recent times of economic uncertainty, CPOs prioritized the delivery of short-term savings and risk management. Although these are still top goals, procurement now has an important role to play in increasing supply chain transparency, harnessing supplier innovation, and reducing costs throughout the entire enterprise. In light of this, procurement leaders in 2018 are more focused on driving innovation forward and adding value to the entire organization. To do this effectively, however, Deloitte rightly points out that changes—especially in leadership, talent and innovation—will have to happen at a faster pace.
What are the Challenges Facing CPOs in 2018?
CPOs certainly have their work cut out for them. There are a number of challenges that procurement professionals will have to face in the coming years, but the Deloitte CPO Survey points to three key issues that will need to be addressed soon if organizations hope to reach their objectives and maintain sustainable success:
The Talent Gap
As in 2017, the majority of procurement professionals are still concerned about the talent available to them. 51% believe that their teams do not have the skills or capabilities needed to deliver on their procurement strategy.
Lack of Transparency in the Supply Chain
An alarming 65% of CPOs claim that they have limited or no visibility beyond their tier 1 suppliers. This is preventing many procurement organizations from effectively driving innovation forward, which requires transparency and close collaboration with suppliers.
Lack of Leadership in Preparing for the Digital Transformation
Procurement professionals agree that analytics will have the greatest impact on procurement in the next two years. According to the results of the survey, analytics are already being used for cost optimization, process improvement and reporting, and the importance of analytics and effectively harnessing big data is only expected to increase. Despite this, procurement organizations today still seem unprepared for a digital future. The survey results show that while high performing procurement organizations are leading the way on the adoption of digital tools, most procurement leaders are hesitant to explore new technology like AI, robotics and blockchain, and even more established modern technology is still not widely used. Only 1/3 of procurement leaders are currently using technologies like predictive analytics or collaboration networks, and 17% of those surveyed said they had no digital procurement strategy at all.
So, how can CPOs successfully face these challenges in 2018?
This year, Deloitte has put together a “To Do” list based on the practices of high-performing organizations with actions that procurement leaders can start to incorporate into their current and future strategic planning.
CPO Action Plan 2018: Focus on Digital and Procurement Leadership
Deloitte points out a correlation between high-performance and strategic leadership traits, such as focusing on innovation and digital transformation. Top procurement organizations have already taken significant steps towards investing in digital tools and implementing them to boost their procurement strategies, improve collaboration, and drive innovation.
There’s no way around it: digitalization is a must for modern procurement organizations, and for good reason, as Deloitte points out in the report:
Deloitte’s view is that applying digital technologies to the procurement function will enable strategic sourcing to become more predictive, transactional procurement to become more automated, supplier management to become more proactive, and procurement operations to become more intelligent.
Successfully implementing digital technologies can have a serious impact by helping CPOs achieve their goals. Remember those key focus areas we mentioned earlier? Digitalization can help procurement organizations:
- Cut costs by automating many transactional P2P processes, such as invoicing, and sourcing processes like submitting RFQs/RFIs
- Increase visibility across the supply chain, making it easier to manage risk more effectively
- Improve collaboration, whether it’s within the organization, with partners or with suppliers, thereby driving innovation
- Attract talent, especially from the millennial generation, who will not be willing to work for a company that seems to be behind current trends and technologies.
Procurement leaders need to pick up the pace on setting up their digital procurement strategies or risk falling behind. This will introduce new challenges, such as how to effectively apply digital technology. The biggest barriers to effective implementation according to the survey are a lack of integration and poor data quality. Companies will have to invest in primary data management and find tools that can be seamlessly integrated into their ERP systems. This will also leave companies prepared to use analytics more effectively.
Beyond this, companies will also have to start making more investments in developing talent. Three out of four procurement leaders said their teams possessed little to no capability to maximize the use of current and future digital technologies, which is alarming given the growing importance of these technologies to an organization’s success. Despite this worrying statistic, however, only 16% of organizations are actively focused on enhancing the digital skills of their teams. This is disappointing and shortsighted. Procurement organizations will need to start investing in both their teams and their digital strategies to ensure continued success.